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One in five apprentices paid below national minimum wage

Companies hiring apprentices are failing to pay the correct hourly rate with 19% of employers not following national minimum wage rules while the number of apprenticeships has dropped dramatically since the launch of the apprenticeship levy

13 Jan 2020

Sara White

Compliance with national minimum wage rates for Level 2 and Level 3 apprentices has worsened over the past two years, with 19% of these second and third-year apprentices paid less than legally required, showed the latest Apprenticeship Pay Survey from the Department for Business, Enterprise and Industrial Strategy (BEIS).

First year apprentices were generally paid the correct rate but once they entered the second year of training, compliance levels fell with a third of apprentices paid below the national minimum wage (NMW).

Employers in hairdressing (47%) and children’s care (34%) were most likely to flaunt the wage rules, while those running management apprenticeships, including accounting apprentices, for example, were likely to be paid correctly although even at this level 7% of apprentices are likely to be underpaid.

Those who stated that they received at least one day a week of formal training were more likely to receive non-compliant pay (22%) than those who had less formal training each week (16%).

The BEIS report said that ‘this could imply that in some cases employers are failing to pay apprentices for time spent on formal training, thus pushing up non-compliance among this group’.

The highest pay rates for Level 2 and Level 3 apprentices were in management at an average £11.44 an hour, up 31% since the 2016 survey, retail at £7.75 (against £6.95) and electrotechnical at £7.54, while hairdressing apprentices only earned £3.70 an hour, albeit up 7% from £3.47.

Apprenticeship levy

Government policy is focused on raising the number of apprentices in the UK with the introduction of the apprenticeship levy designed to force companies to offer structured training. However, since it came into force in April 2017, the number of apprentices fell dramatically from 564,800 in 2016 to 364,000 in 2018.

The policy was first floated in Summer Budget 2015 by then chancellor George Osborne.

Employers with an annual wage bill of over £3m have to pay the annual levy and then effectively reclaim it to cover apprenticeship training costs, while those below this bar can apply for funds. However, the funding system has distorted the market with numerous new training providers offering higher level apprenticeships, particularly in management and soft skills, while the number of core technical, construction and engineering apprentices has declined.

In its first full year of operation, the apprenticeship levy raised £2.7bn for the Treasury and is expected to rise to £3.4 bn by 2023-24. However, there have been repeated warnings in recent months that the funding pot generated by the levy is about to run out, and the number of apprentices has fallen sharply since the training tax was introduced.

‘The swift disappearance of the funds raised by the levy is the direct result of the dilution of the apprenticeship brand caused by the rapid emergence of “fake apprenticeships”, warned Tom Richmond, founder and director of the EDSK think tank. ‘Regrettably, it has reached the point where the apprenticeship brand itself has arguably become a meaningless concept, such is the prevalence of the inappropriate rebadging and relabelling of existing training courses by some employers and universities.

‘Given the looming prospect of a significant overspend on apprenticeships in the coming months, there is no doubt that the Treasury and the Department for Education must enact major changes to make the apprenticeships programme financially viable.’

There is a separate NMW rate for apprentices aged 16 to 18 and those aged 19 or over who are in their first year of the apprenticeship. All other apprentices are entitled to the NMW for their age.

National Minimum Wage rates (hourly)

Year

Apprentice*

Under 18

18-20

21-24

NLW (25 and over)

Apr-18

£3.70

£4.20

£5.90

£7.38

£7.83

Apr-19

£3.90

£4.35

£6.15

£7.70

£8.21

*Aged 16-18 or in first year of apprenticeship; NLW national living wage

The survey was conducted through 9,582 phone interviews with apprentices conducted from November 2018 to March 2019.